The Treasury sees a faster pace of inflation coming.
New Zealand’s S&P/NZX 50 index snapped a three-day run of gains in a broadly weaker session across Asia, with heavyweights Fisher & Paykel Healthcare and Meridian Energy the biggest drags on the bourse as investors continue to fret about the tensions in the Middle East.
The kiwi dollar dipped after Moody’s Ratings tagged a ‘negative’ outlook on New Zealand’s Aaa sovereign credit rating, while finance minister Nicola Willis warned the energy shock forced a rework of the upcoming budget, with Treasury officials warning of slower growth and a faster pace of inflation as they rework their forecasts for the fiscal projections.
Genesis Energy was among gainers as it joined other power companies in upgrading its earnings guidance on the flush hydro dams, while Heartland Group Holdings gained after affirming its outlook.
And NZX chief executive Mark Peterson delivered his final address to shareholders at the stock market operator’s annual meeting, urging policymakers to be cognisant about the regulatory impost on the cost of capital in a globally competitive environment.
The NZX50 fell 60.67 points, or 0.5%, to 12,884,93, with 20 stocks declining, 24 gaining, and six unchanged. Turnover across the main board was relatively quiet $103 million, of which Mercury NZ accounted for $13.5 million as it gained 1.1% to $6.67.
The local market was caught up in a downbeat mood across Asia, with Australia’s S&P/ASX 200 index down 0.8% in late trading, Japan’s Nikkei 225 falling 0.9% and Hong Kong’s Hang Seng sliding 1.1%, as investors continue to fret over whether the US and Iran will resume peace negotiations. The Polymarket prediction market is pricing in a 36% chance of a lasting truce by the end of May and a 58% chance by the end of June.
“The good news is we’ve got a ceasefire; the bad news is that we haven’t got a deal,” said Mark Lister, investment director at Craigs Investment Partners. “Both sides seem quite far away from a sustainable resolution.”
Blue chip stocks weighed on the NZX50, with F&P Healthcare falling 3% to $36.25, Meridian slipping 1.2% to $5.62, Infratil declining 0.6% to $12.38 and Auckland International Airport decreasing 0.2% to $8.20.
KMD Brands posted the steepest decline, falling 4.7%, or 0.3 of a cent, to 6.1 cents, on a volume of almost 2 million shares. The retailer completed its discounted capital raising yesterday, with sub-underwriters picking up a chunk of shares in the shortfall bookbuild at 6 cents a share.
Ryman Healthcare posted the biggest increase on the day, up 4.8% at $2.20 and extending its run to four gains in a row. Forsyth Barr analysts raised their outlook on the stock to ‘outperform’ this week given the record low earnings multiples it’s been trading at.
Summerset Group Holdings gained 3.2% to $8.31.
Meanwhile, Genesis rose 1.8% to $2.33 after lifting its earnings guidance 5% as another beneficiary of full hydro dams. Heartland increased 0.4% to $1.15 after confirming its forecast for underlying profit to rise at least 7% in the June year, with strong growth in its reverse mortgages business on both sides of the Tasman.
NZX was unchanged at $1.40 after chair John McMahon told shareholder at today’s annual meeting that the Middle East conflict could dent revenue if soft asset prices flow through to its Smart funds management and Wealth Technologies administration units, but that it’s too early to gauge that yet.
Outside the benchmark index, ikeGPS climbed 4.6% to $1.13 after confirming it met earnings guidance as annual platform subscription revenue jumped 33% in the year.
Locate Technologies jumped 14%, or 0.3 of a cent, to 7 cents on very light trading after the software and Bitcoin treasury firm marked its first positive quarter of earnings before interest, tax, depreciation and amortisation.
The kiwi dollar lost ground against all its major trading partners, falling to 58.85 US cents at 5pm in Auckland from 59.06 cents yesterday after Moody’s Ratings put a ‘negative’ outlook on New Zealand’s credit rating as global uncertainty threatens to constrain growth at a time when the government’s debt burden remains uncomfortably high.
Finance minister Willis said the Treasury is reworking its forecast for the budget, with the most likely scenario currently that Brent crude averages US$110 a barrel this quarter before returning to normal early next year, pushing the pace of inflation up to 3.9%. Brent crude futures rose 1.2% to US$103.13 at 5pm.
The yield on New Zealand’s 10-year government bond rose 4 basis points to 4.72%.
Reporting by Paul McBeth.
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